Sagar Cements has corrected its valuation to around 20 percent after its recent fund infusion, a renewed focus on non-south markets, and its plan to add capacity to more than 10 million tonne per annum.

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The company's financials has been dwindling, but has shown some improvement on a sequential basis in Q3 FY23. Its EBITDA per tonne has recovered to near 400 per tonne and the good news is now that they are selling near 1.2 mt in a quarter which is 5 mt per annum.

The company has been setting up capacities in other non-south regions as well with some presence in Madhya Pradesh and Odisha already.

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From being south-focused now they have sales in Madhya Pradesh, Maharashtra, and Odisha. Additionally, the company has been focusing on cost side by improving their operational infrastructure, by building railway sidings, captive power plant and waste heat recovery system which will benefit them over the coming years.

The company has hit their targeted 10 million tonnes targeted capacity ahead of their 2025 goal. The resolution professional of Andhra Cements, a Jaypee Group company has declared Hyderabad-based Sagar Cement as the successful resolution applicant for the former.

Valuation wise the stock trades at a sharp discount to replacement cost of $100 per tonne. Now their enterprise value includes Rs 1,000 crore of debt of which Rs 500 crore is attributed to Andhra Cement acquisition. So ex of Andhra Cement debt and capacity the stock trades at $51 per tonne and assuming they will incur another 500 crore capex to get Andhra Cement operational they still trades at $55 per tonne which is a sharp discount to replacement cost for a 10 mt capacity.

Focusing on their shareholding pattern, in the past 1 year PI Opportunities Fund, an affiliate of Premji Invest, bought 10 percent stake at Rs 265 a share.

Besides that the promoter entity has 45 percent, Belgium-based AVH Resources has 20 percent stake while the remaining is split between various large domestic and foreign funds.

The key triggers to track include scaling up of sales towards more than 6mtpa versus the current run rate of 5 mtpa, ramping up of newly acquired Andhra Cement and debt peaking around Rs 1,500 crore.

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(Edited by : C H Unnikrishnan)